PNB Housing Finance expects its newly launched micro-housing loan business to reach an asset under management of around INR 100 crore by the end of the current financial year, as the housing finance company increases its focus on the affordable housing segment. 
The company has already launched the product and is now preparing to increase disbursements after completing the required policy framework and employee training. Managing Director and Chief Executive Officer Ajai Kumar Shukla said the business has started and is expected to build a portfolio of around INR 100 crore by the end of the financial year. 
The company is targeting customers with relatively lower income profiles through the new product, but Shukla said there would be no relaxation in its credit assessment process. The lender will continue to follow its existing valuation, legal, underwriting and customer discussion procedures while evaluating borrowers. 
The move comes as PNB Housing Finance continues to increase its exposure to affordable and emerging housing. Analysts have also identified these segments as important contributors to the company's future loan growth, although the affordable housing portfolio carries higher asset-quality risks as it matures. 
Shukla said the company's leverage is expected to increase as the capital raised earlier is deployed to support business growth. PNB Housing Finance's current leverage is around 3.7-3.8 times, and the company expects it to move closer to six times over the next three years. 
The additional capital is expected to be used largely for organic growth rather than through aggressive portfolio expansion. This approach will allow the company to increase its lending capacity while continuing to maintain its focus on retail housing finance. 
The company's capital adequacy ratio stood at 28.26 per cent in June, compared with 27.26 per cent at the end of March and 29.68 per cent in the corresponding period of the previous year. 
PNB Housing Finance will also continue to undertake selective portfolio acquisitions. The company acquired loan pools worth around INR 146 crore during the first quarter, according to Shukla. 
PNB Housing Finance is classified as an Upper Layer entity under the Reserve Bank of India's scale-based regulatory framework for NBFCs. Its financial disclosures also show that the company has maintained a focus on secured lending and regulatory capital requirements. 
The company's reported borrowing cost has remained broadly stable at around 7.35-7.36 per cent. Shukla said the cost could soften if market conditions become more favourable. 
He expects the company could see a benefit of around 0.10 percentage point as banks benefit from the Reserve Bank of India's FCNR(B) measures and PNB Housing Finance increases its access to refinancing from the National Housing Bank. 
The company is also expected to benefit from improving funding conditions as it continues to access different sources of debt. PNB Housing Finance's borrowing costs and margins remain important to its strategy as it expands its loan book while operating in affordable and emerging housing segments. 
PNB Housing Finance has restarted construction finance lending but plans to keep the business within defined limits. Shukla said construction finance could account for around 3 per cent of the company's loan book during the first year and could increase to around 7-8 per cent over a three-year period. 
The company intends to ensure that construction finance does not exceed 10 per cent of its overall book. The management has reiterated that PNB Housing Finance will remain primarily a retail housing finance company. 
The company will initially offer construction finance in around eight to 10 cities. These include Mumbai, Delhi, Bengaluru, Chennai, Hyderabad, Pune and Ahmedabad. Lending will be directed towards developers with strong execution capabilities and a track record of completing projects on time. 
The controlled expansion is in line with the company's broader approach of keeping non-retail lending within limits while focusing on individual housing and affordable segments. An earlier company strategy had also placed emphasis on keeping construction finance as a controlled part of the overall portfolio. 
PNB Housing Finance has been strengthening its presence in affordable and emerging housing, supported by an expansion of its branch network and distribution infrastructure. The company has indicated that these segments are expected to account for a larger share of its business over the coming years. 
The company had previously guided towards faster growth in affordable housing disbursements from a relatively smaller base. Its strategy is aimed at expanding the retail loan book while keeping underwriting and asset-quality controls in place. 
The launch of the micro-housing product is another step in this direction. With the operating framework and employee training now completed, the company expects the product to move into a more active disbursement phase. 
For construction finance, however, the company is maintaining a separate and more cautious approach. By limiting the segment to selected cities and developers with established execution capabilities, PNB Housing Finance is seeking to keep its exposure controlled while continuing to participate in project financing. 
Source PTI